Study Finds California is Losing High Earners & Business Owners

Business owners and high earners are leaving California but the number of workers in lower wage service industries is on the rise, leading experts to fear that capital investments will relocate to other states.

The findings are part of a study called “Is California Losing Its Mojo” published by Chapman University Business Professor Marshall Toplansky and UC Irvine business professor Dr. Ken Murphy.

“The things that drive people to leave a place are trying to find basic housing that they can afford and the jobs that pay them something,” Professor Toplansky told California Insider on YouTube. “Right now, the rate of job creation in places like Texas, Utah and Arizona, which have lower costs of living than we do, are just going higher than ours.”

The study, funded by the CEO Leadership Alliance of Orange County, found that 79% of jobs created in California pay below the U.S. median income rate and California’s population growth or maintenance is highly related to migration from outside the United States. In fact, the Golden state is home to 10.6 million immigrants, according to the Public Policy Institute of California (PPIC).

“The people who have been moving out of California are exactly those you want to be in California,” Toplansky said. “These are people who are smart, who are making well above the average pay and so the companies that employ those people are moving out of state and [these workers] are moving along with them.”

Companies Leaving California

For example, in 2021, the financial services company, Charles Schwab, moved its headquarters from San Francisco to Westlake, Texas and Tesla, the car company owned by Elon Musk, relocated most of its headquarters from Palo Alto to Austin, Texas.

Further, last year, the oil company Chevron announced plans to relocate headquarters to Houston, Texas from San Ramon, California and Oracle relocated its headquarters first to Texas and now to Nashville, Tennessee.

“We’re seeing a defection of the $200,000 to $400,000 a year job and the kind of person that would have that job,” Toplansky said. “What we’re replacing it with are people who can’t afford to live here with low end service jobs in the hospitality industry and healthcare industry.”

Real estate expert Wesley Kang said companies are leaving because permitting for innovation labs and testing facilities is slow.

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The founder of 1099Cafe just helped three tech executives sell their Orange County homes.

“While Texas approved their new research center in 30 days, California’s process would take 18 months,” Kang told OrangeCountyLawyers.com.

With 420,434 restrictions listed in the California Code of Regulations (CCR), the Mercatus Center at George Mason University ranked California the most regulated among the 50 states followed by New York, New Jersey, Illinois and Texas.

The least regulated include Alaska, Montana, North Dakota, South Dakota and Idaho.

“Other places, that are also considered a privilege to live in, make it a lot easier for businesses to be there,” Toplansky added. “So, do we want to be competitive or do we want to have our head in the clouds? This is a real world for legislators to have to grapple with. [California] is not the only game in town.”

There is hope for California, however, especially for the biotech corridor in Orange County, according to Wang who watched a tech firm convert their traditional office into a hybrid innovation hub.

“Instead of leaving, they’re creating the infrastructure that keeps talent local,” Wang added. “And a client’s medical device company moved back from Austin because they couldn’t find specialized talent there.”